Stablecoin Flows to Crypto Exchanges are Good Sign for Market Recovery
- Stablecoin are digital currencies backed by real-world assets or fiat currencies like the dollar.
- The amount of stablecoins flowing into exchanges reached $490 million last week.
- This is a 58% increase in seven days and the third week in a row that stablecoins are flowing
Bank of America researches say that the rise in stablecoin exchange inflows could mean that the crypto market is on its way to a recovery.
In a report released on Friday, analysts Alkesh Shah and Andrew Moss said that even though digital assets act like “risk assets,” the amount of stablecoin flowing into exchanges reached $490 million the week before the report. This was a 58% increase in just seven days and the third week in a row that stablecoin were flowing in.
This is a good sign because it means that “people are using them in the real world for things like payments and remittances.”
Stablecoins are digital currencies that are backed by real-world assets or fiat currencies like the dollar.
People use them to trade quickly in and out of other coins or tokens without having to convert them to a hard currency like U.S. dollars.
In its report, Bank of America also said, “Three consecutive weeks of stablecoin inflows suggest that investors may be increasing their exposure to digital assets selectively after taking a defensive stance.”
This year, both the crypto market and U.S. stocks have been hit hard as investors put their money into what they think are safer assets, like the U.S. dollar, to avoid risk.
Most people think of cryptocurrencies as risky investments. Arcane Research data shows that Bitcoin, which has the biggest market capitalization, has mostly done like a tech stock this year. This is different from what supporters of the asset said it would do. They said it would be a “uncorrelated asset” or a hedge against inflation.
According to CoinGecko, the price has dropped 72% since its all-time high of $69,044. It is now worth $19,133.